Returns Paid To Early Social Security Cohorts

Previous research generally concludes that early participants in the Social Security system received a very good “deal”—better than later participants received, and much better than future participants are likely to get. However, researchers do not know the values of those deals and their distribution across individuals and groups largely because the necessary data have not been available. The study here uses the Social Security Administration's 1988 Continuous Work History Sample (CWHS) to calculate early participants' real internal rates of return to contributions. The study analyzes sex, race, household type, income, and birth cohorts and employs new Census Bureau mortality projects to forecast more accurately how life expectancies and benefit streams vary by race as well as by sex and birth cohort. Results contribute to an understanding of how the Social Security system redistributes income. All sample groups received high real rates of return. However, the returns varied widely by household type, income level, birth cohort, and other factors. The authors calculate that persons born from 1895 to 1922 received a total transfer of £3.5 trillion, of which £1.3 trillion remained to be paid as of 1988.